The Company generally experiences positive cash flow from operations resulting from the fact that premiums are collected on insurance policies in advance of the disbursement of funds in payment of claims. Operating costs of the property/casualty insurance subsidiaries, other than loss and loss expense payments and commissions paid to related agency companies, generally average less than 30% of premiums earned and the remaining amount is available for investment for varying periods of time pending the settlement of claims relating to the insurance coverage provided. The Company's cash flow relating to premiums is significantly affected by reinsurance programs in effect from time-to-time whereby the Company cedes both premium and risk to other insurance and reinsurance companies. These programs vary significantly among products. For the first nine months of 2009, the Company experienced positive cash flow from operations totaling $14.6 million which compares to negative cash flow from operations of $.2 million generated during the first nine months of 2008. The $14.8 million improvement in cash flow from the 2008 period is primarily due to higher gross premiums received, the timing of reinsurance payable payments and the timing of tax payments. These increases were partially offset by a $4.2 million increase in loss payments related to the settlement of several large claims during the 2009 period.

For several years, the Company's investment philosophy has emphasized the purchase of relatively short-term instruments with maximum quality and liquidity. The average life of the Company's fixed income (bond and short-term investment) portfolio was 3.6 years at September 30, 2009, which is substantially shorter than the Company's liability duration.

Financing activity for the first nine months of 2009 included regular dividend payments of $11.1 million ($.75 per share), and the purchase of $.9 million of the Company's common stock on the open market under the Company's previously announced stock repurchase program.

The Company's assets at September 30, 2009 included $56.8 million in investments classified as cash equivalents that were readily convertible to cash without significant market penalty. An additional $206.1 million of fixed maturity investments will mature within the twelve-month period following September 30, 2009. The Company believes that these liquid investments are more than sufficient to provide for projected claim payments and operating cost demands.

Consolidated shareholders' equity is composed largely of GAAP shareholders' equity of the insurance subsidiaries. As such, there are statutory restrictions on the transfer of portions of this equity to the parent holding company. At September 30, 2009, $39.0 million may be transferred by dividend or loan to the parent company during the remainder of 2009 without approval by, or prior notification to, regulatory authorities. An additional $242.8 million of shareholder's equity of the insurance subsidiaries could, theoretically, be advanced or loaned to the parent holding company with prior notification to, and approval from, regulatory authorities, although it is unlikely that transfers of this size would be practical. The Company believes that these restrictions pose no material liquidity concerns to the Company. The Company also believes that

the financial strength and stability of the subsidiaries would permit ready access by the parent company to short-term and long-term sources of credit. The parent company had cash and marketable securities valued at $5.0 million at September 30, 2009.

The Company's annualized premium writing to surplus ratio for the first nine months of 2009 was approximately 43%. Regulatory guidelines generally allow for writings of at least 100% of surplus. Accordingly, the Company could increase premium writings significantly with no need to raise additional capital. Further, the insurance subsidiaries' individual capital levels are several times higher than the minimum amounts designated by the National Association of Insurance Commissioners.

Net premiums earned during the third quarter of 2009 increased $1.5 million (3.4%) as compared to the same period of 2008. The Company's Property and Casualty Insurance and Property Reinsurance segments reported increases of 2.1% and increases of 8.8%, respectively. These changes are in line with expectations and result from the continuing expansion of Property Reinsurance activities and new marketing efforts in the Property and Casualty Insurance segment. The following table provides information regarding premiums written and earned for major product lines for the quarter ended September 30 (dollars in thousands):

                                                                        2009
                                                     Direct and
                                                       Assumed
                                                       Premium       Net Premium     Net Premium
                                                       Written         Written         Earned
Property and Casualty Insurance
Fleet Transportation                                 $    40,791     $    28,223     $    28,716
Private Passenger Automobile                               6,406           6,327           5,971
Residual Market and All Other                              7,310           3,706           1,117
                                                          54,507          38,256          35,804
Property Reinsurance                                       9,327           9,272           9,273
Totals                                               $    63,834     $    47,528     $    45,077

                                                                         2008
Property and Casualty Insurance
Fleet Transportation                                 $    39,461     $    28,160     $    29,705
Private Passenger Automobile                               4,140           4,033           5,133
Residual Market and All Other                                202             201             218
                                                          43,803          32,394          35,056
Property Reinsurance                                      10,584           8,523           8,523
Totals                                               $    54,387     $    40,917     $    43,579

Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 24.8% of premium earned for the current quarter compared to 19.9% a year earlier, reflecting the overall increased utilization of both facultative and treaty reinsurance.

Net investment income, before tax, during the third quarter of 2009 was 25.5% lower than the third quarter of 2008 due primarily to lower available interest rates, particularly for short-term investments. Pre-tax yields averaged 3.1% during the current quarter compared to 3.7% for the prior year period. Overall after-tax yields decreased from 3.1% to 2.5%. The short term nature of the Company's fixed income portfolio causes changes in available yields to be quickly reflected in investment income.

The third quarter 2009 net realized investment gains of $15.4 million resulted primarily from gains on limited partnerships. Comparative third quarter 2008 investment losses were $16.0 million. The investment realized gains during the current quarter were favorably impacted by the recovery of value in the global equity markets. See footnote 2 to the enclosed financial statements for a more detailed discussion regarding the accounting policies and the net gains or losses reported for the Company's investments in limited partnerships.

Losses and loss expenses incurred during the third quarter of 2009 were $3.7 million lower than that experienced during the third quarter of 2008 due primarily to hurricane losses in 2008. Loss ratios for each of the Company's major product lines were as follows:

                                 2009        2008
Fleet Transportation             57.4 %      60.1 %
Private Passenger Automobile     67.4        62.2
Property Reinsurance             61.0       107.4
All lines                        59.3        69.8

Other operating expenses, for the third quarter of 2009, increased $2.6 million, or 17%, from the third quarter of 2008. The majority of this increase relates to expenses incurred as the result of numerous initiatives by the Company relating to entry into new products and markets, for which revenues have yet to be realized. It is expected that such organizational expenses will be ongoing throughout 2009 although revenue associated with this activity is expected to increase gradually during this period. The ratio of consolidated other operating expenses to operating revenue was 35.2% during the third quarter of 2009 compared to 30.8% for the 2008 third quarter.

The effective federal tax rate on consolidated income for the third quarter of 2009 was 32.2%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

As a result of the factors mentioned above, net income increased $21.6 million during the third quarter of 2009 as compared to the 2008 period.

Comparisons of Nine Months Ended September 30, 2009 to Nine Months Ended September 30, 2008

Net premiums earned during the first nine months of 2009 decreased $5.3 million (3.9%) as compared to the same period of 2008. The Company's Property and Casualty Insurance and Property Reinsurance segments reported decreases of 8.1% and increases of 14.4%, respectively. These changes compare to increases in gross premiums written of 7.8% for the same periods. The decline in earned premium despite an increase in premium written is in line with expectations and results from the continuing expansion of Property Reinsurance activities, the lag between written and earned premium for annual term policies and increased utilization of reinsurance for products in the Property and Casualty Insurance segment. The following table provides information regarding premiums written and earned for major product lines for the nine months ended September 30 (dollars in thousands):

                                                                         2009
                                                      Direct and
                                                        Assumed
                                                        Premium        Net Premium     Net Premium
                                                        Written          Written         Earned
Property and Casualty Insurance
Fleet Transportation                                 $     116,520     $    80,927     $    82,414
Private Passenger Automobile                                20,372          20,153          17,048
Residual Market and All Other                               12,131           6,013           2,063
                                                           149,023         107,093         101,525
Property Reinsurance                                        29,467          28,733          28,758
Totals                                               $     178,490     $   135,826     $   130,283

                                                                          2008
Property and Casualty Insurance
Fleet Transportation                                 $     121,418     $    90,243     $    92,971
Private Passenger Automobile                                15,080          14,789          16,509
Residual Market and All Other                                1,171           1,169             956
                                                           137,669         106,201         110,436
Property Reinsurance                                        27,922          25,123          25,133
Totals                                               $     165,591     $   131,324     $   135,569

Premium ceded to reinsurers on insurance business produced by the Property and Casualty Insurance segment averaged 24.5% of premium earned for the current year period compared to 19.2% a year earlier, reflecting the overall increased utilization of both facultative and treaty reinsurance.

Net investment income, before tax, during the first nine months of 2009 was 21.7% lower than the first nine months of 2008 for the same reasons noted in the quarterly comparison. Pre-tax

yields averaged 3.2% during the current period compared to 3.7% for the prior year period. Overall after-tax yields decreased from 3.1% to 2.7%.

Net realized investment gains, for the first nine months of 2009, were $26.7 million resulting primarily from gains on limited partnerships. Realized investment losses were $32.5 million for the same period in 2008. The realized investment gains during the current period were favorably impacted by the recovery of value in the global equity markets. See footnote 2 to the enclosed financial statements for a more detailed discussion regarding the accounting policies and the net gains or losses reported for the Company's investments in limited partnerships.

Losses and loss expenses incurred during the first nine months of 2009 were $13.7 million lower than that experienced during the first nine months of 2008 due to lower earned premium volume and lower hurricane losses. Loss ratios for each of the Company's major product lines were as follows:

                                 2009       2008
Fleet Transportation             57.1 %     63.6 %
Private Passenger Automobile     68.3       64.6
Property Reinsurance             44.1       63.7
All lines                        55.8       63.7

Other operating expenses, for the first nine months of 2009, increased $5.6 million, or 13%, from the 2008 nine-month period. The majority of this increase relates to expenses incurred as the result of numerous initiatives by the Company relating to entry into new products and markets, for which revenues have yet to be realized. It is expected that such organizational expenses will be ongoing throughout 2009 although revenue associated with this activity is expected to increase gradually during this period. The ratio of consolidated other operating expenses to operating revenue was 34.9% during the 2009 period compared to 29.6% for the 2008 period.

The effective federal tax rate on consolidated income for the first nine months of 2009 was 30.1%. The effective rate differs from the normal statutory rate primarily as a result of tax-exempt investment income.

As a result of the factors mentioned above, net income increased by $39.5 million as compared with the 2008 period.

Any forward-looking statements in this report, including without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company's business is highly competitive and the entrance of new

competitors into or the expansion of the operations by existing competitors in the Company's markets and other changes in the market for insurance products could adversely affect the Company's plans and results of operations; (iii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission; and (iv) other risks and factors which may be beyond the control or foresight of the Company. Readers are encouraged to review the Company's annual report for its full statement regarding forward-looking information.

There have been no changes in the Company's critical accounting policies as disclosed in the Form 10-K filed for the year ended December 31, 2008 except for the following paragraph.

In April 2009, the FASB issued guidance on the recognition and presentation of other-than-temporary impairments, or FASB OTTI guidance. The FASB OTTI guidance applies to fixed maturity securities only and provides new guidance on the recognition and presentation of other-than-temporary impairments. In addition, the FASB OTTI guidance requires additional disclosures related to other-than-temporary impairments. Under this revised guidance, if a fixed maturity security is in an unrealized loss position and the Company has the intent to sell the fixed maturity security, or it is more likely than not that the Company will have to sell the fixed maturity security before recovery of its amortized cost basis, the decline in value is deemed to be other-than-temporary and is recorded to net realized losses on investments in the consolidated statements of operations. For impaired fixed maturity securities that the Company does not intend to sell or it is more likely than not that the Company will not have to sell such securities, but the Company expects that it will not fully recover the amortized cost basis, the credit component of the other-than-temporary impairment is recognized in net realized losses on investments in the consolidated statements of operations and the non-credit component of the other-than-temporary impairment is recognized directly in shareholder's equity (accumulated other comprehensive income).

The insurance subsidiaries cede portions of their gross premiums to numerous reinsurers under quota share and excess of loss treaties as well as facultative placements. These reinsurers assume commensurate portions of the risk of loss covered by the contracts. As losses are reported and reserved, portions of the gross losses attributable to reinsurers are established as receivable assets and losses incurred are reduced. At September 30, 2009, amounts due from reinsurers on paid and unpaid losses, are estimated to total approximately $146 million. Of this total, approximately $54 million (37%) represents the Company's provision for incurred but not reported losses and loss adjustment expenses attributable to reinsurers. Because of the large policy limits reinsured by the Company, the ultimate amount of incurred but not reported losses attributable to reinsurers could vary significantly from the estimate provided; however, such variance would not result in changes in net losses incurred by the Company.

At September 30, 2009, limited partnership investments include approximately $46.7 million consisting of three partnerships which are managed by organizations in which certain of the
Company's directors are officers, directors, general partners or owners. Each of these investments contain profit sharing agreements to the affiliated organizations.